Chinese authorities have been rolling out a series of measures to boost market confidence. Global banks voice out their views on whether or not this will trigger a sustained rebound.
In recent weeks, Chinese authorities have been ramping up efforts to improve investor confidence and steer a market turnaround. This includes a surprise 50 basis point cut to the reserve requirement ratio, intensified purchase of Chinese exchange-traded funds by state-owned Central Huijin and the replacement of the securities regulator head. There is also the reported consideration of a $319 billion rescue package.
Since the introduction of such measures, the CSI 300 Index has halted its decline and is now down less than 1 percent year-to-date. But is this enough to trigger a rally?
Bottoming Sentiments
According to a note by J.P. Morgan Private Bank, the rescue package, even if confirmed, is «not a game changer» though «it could mark the bottom of market sentiment».
The bank expects offshore and onshore equity markets to stabilize around current levels but noted that it is «probably too early to call a turnaround». It advocates for a neutral positioning on China, or around 4-5 percent of an equity allocation, and added that it will remain a trading market.
More Stimulus Needed
Instead, J.P. Morgan believes that the market is still hoping for more macro stimulus, such as expanded fiscal spending and coordinated efforts to resolve the property downturn. William Sels, global CIO of HSBC Global Private Banking, echoed the views in a commentary and advised for highly selective positioning in consumer services leaders, IT hardware linked with AI and winners in the electric vehicle supply chain.
«A grander-scale, more forceful stimulus, designed to revive domestic demand and re-ignite the positive 'loop-back' effect into consumption, is needed to boost sentiment on a sustainable basis,» added Standard Chartered investment strategist Michelle Kam in a separate note, highlighting state-owned enterprises as an increasingly attractive opportunity.
